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Client industry audit expertise: towards a better understanding

Client industry audit expertise: towards a better understanding Purpose – The purpose of this paper is to consider the supply of audit firm industry specialisation in the market for statutory audits of publicly traded companies in Australia. The purpose of this study is to seek to gain a better understanding of the dynamics within the market for industry specialist audit services. Design/methodology/approach – A structured interview process is used to investigate certain issues with the suppliers of industry specialist audit services (in this case all the then Big 5). Findings – This paper found that industry specialisation involves the Big 5 audit firms developing a specialised knowledge of what clients do within any given industry and the issues and audit risks they face. The Big 5 have industry “focus” groups that are responsible for providing “leading edge” practices to their clients. According to many of the auditor interview respondents, the large number of Australian Stock Exchange (ASX) classifications has meant that audit firms have sought a more manageable means of partitioning their practices into different industry focus groups. The ASX classifications were described by some of those interviewed as being irrelevant. This raises questions regarding prior auditor industry specialisation research that has relied on these classifications. Research limitations/implications – The study does suffer from two limitations. First, the research only questioned the Big 5 firms, despite evidence that non‐Big 5 firms can create specialisations. Second, the study's data is relatively dated being collected in the late 1990s, so there is a possibility the findings may now be out of date, particularly given as indicated before, specialisation premiums are not generalisable across time. Originality/value – The paper demonstrates the criticality of the relationship between audit market participants in developing an underlying framework that can universally explain the interactions that occur in the market for specialised audits. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

Client industry audit expertise: towards a better understanding

M. Kend
Pacific Accounting Review , Volume 20 (1): 14 – May 16, 2008
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References (17)

Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
0114-0582
DOI
10.1108/01140580810872843
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to consider the supply of audit firm industry specialisation in the market for statutory audits of publicly traded companies in Australia. The purpose of this study is to seek to gain a better understanding of the dynamics within the market for industry specialist audit services. Design/methodology/approach – A structured interview process is used to investigate certain issues with the suppliers of industry specialist audit services (in this case all the then Big 5). Findings – This paper found that industry specialisation involves the Big 5 audit firms developing a specialised knowledge of what clients do within any given industry and the issues and audit risks they face. The Big 5 have industry “focus” groups that are responsible for providing “leading edge” practices to their clients. According to many of the auditor interview respondents, the large number of Australian Stock Exchange (ASX) classifications has meant that audit firms have sought a more manageable means of partitioning their practices into different industry focus groups. The ASX classifications were described by some of those interviewed as being irrelevant. This raises questions regarding prior auditor industry specialisation research that has relied on these classifications. Research limitations/implications – The study does suffer from two limitations. First, the research only questioned the Big 5 firms, despite evidence that non‐Big 5 firms can create specialisations. Second, the study's data is relatively dated being collected in the late 1990s, so there is a possibility the findings may now be out of date, particularly given as indicated before, specialisation premiums are not generalisable across time. Originality/value – The paper demonstrates the criticality of the relationship between audit market participants in developing an underlying framework that can universally explain the interactions that occur in the market for specialised audits.

Journal

Pacific Accounting Review – Emerald Publishing

Published: May 16, 2008

Keywords: Auditing; Markets; Accounting firms

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